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Valuing Start-Up & Early Stage
Companies…Art or Science
IACT Presentation
February 23, 2010
Frank Morse
Managing Director
...
Page 2
Presentation Outline
Page 3
CMM Profile
History Founded 1987
Services
 Sell-side advisory
 Buy-side advisory
 Valuation services
 Arranging...
Page 4
Valuation: A Working Definition:
 At the core of every investment transaction is a mutually
accepted valuation of ...
Page 5
Carter Morse & Company
Valuation Premises
 Value equals the present value of future benefits of ownership
 Value ...
Page 6
Traditional Valuation Approaches
Page 7
Carter Morse & Company
Valuation Methodologies
Market Approach
 Comparative Public Companies
 Price / Earnings
 ...
Page 8
Carter Morse & Company
Valuation Methodologies
Income Approach
 Income Methodology
 Capitalized Returns Approach
...
Page 9
Carter Morse & Company
Valuation Methodologies
Asset Approach
 Net Asset Value
 Adjusted Book Value
 Liquidation...
Page 10
Private Equity Valuations
Source: GF Data Resources
Transactions under $250 million
Page 11
Valley of Death
Page 12
Valuation stages-Art or Science
Page 13
Valuation stages-Art or Science
Page 14
Financing Company Stage Data
Risk
Uncertainty
Value
Range
($MM)
Seed
Incorporation & Early
Development
Concept, so...
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2205925 frank morse

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2205925 frank morse

  1. 1. Valuing Start-Up & Early Stage Companies…Art or Science IACT Presentation February 23, 2010 Frank Morse Managing Director Carter Morse & Mathias
  2. 2. Page 2 Presentation Outline
  3. 3. Page 3 CMM Profile History Founded 1987 Services  Sell-side advisory  Buy-side advisory  Valuation services  Arranging equity & mezzanine capital  Senior debt financing  Financial advisory services Focus Maximizing shareholder value Track Record 300+ clients Clients Closely-held middle market companies Transaction Size $10 million to $100 million Industries  Healthcare  CPG/Retail  Aerospace  Clean Tech  Specialty Manufacturing  Software and IT  Business services  Financial services
  4. 4. Page 4 Valuation: A Working Definition:  At the core of every investment transaction is a mutually accepted valuation of the company by the investor and entrepreneur.  A valuation reflects both the entrepreneur’s determination of the acceptable amount of ownership that may be given in return for the investor’s capital and expertise, and the venture investor’s determination of the risks and rewards of the investment.  Value equals the present value of future benefits of ownership Adapted from Understanding Valuation: A Venture Investor’s Perspective, Callow and Larsen
  5. 5. Page 5 Carter Morse & Company Valuation Premises  Value equals the present value of future benefits of ownership  Value is not always a single number  Value is based on a single point in time  What is valued  minority interests vs controlling interests  equity value vs. entity value
  6. 6. Page 6 Traditional Valuation Approaches
  7. 7. Page 7 Carter Morse & Company Valuation Methodologies Market Approach  Comparative Public Companies  Price / Earnings  Price / Cash Flow  Price / Book Value  Price / Revenues  Price / Asset Value  Comparative Acquisitions
  8. 8. Page 8 Carter Morse & Company Valuation Methodologies Income Approach  Income Methodology  Capitalized Returns Approach - Capitalization of Earnings - Capitalization of Cash Flow  Discounted Future Returns Approach - Discounted Net Cash Flow - Discounted Earnings
  9. 9. Page 9 Carter Morse & Company Valuation Methodologies Asset Approach  Net Asset Value  Adjusted Book Value  Liquidation Value
  10. 10. Page 10 Private Equity Valuations Source: GF Data Resources Transactions under $250 million
  11. 11. Page 11 Valley of Death
  12. 12. Page 12 Valuation stages-Art or Science
  13. 13. Page 13 Valuation stages-Art or Science
  14. 14. Page 14 Financing Company Stage Data Risk Uncertainty Value Range ($MM) Seed Incorporation & Early Development Concept, soft data, no mgt, Highest Risk .1-1.0 Series A Development Market validation and little technology risk Very High 3-5 Series B Shipping Product Beginning Revenues High 5-10 Series C Reference Clients Predictive Revenues Moderate >10 Later Stage/Mezzanine Profitable Hard Data, EBITDA Normal Business Risk 20-50 Public Company Profitable Public Information Least Risk Whatever Valuation By Stage

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